Dara Calleary (Mayo, Fianna Fail)
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Question 194: To ask the Minister for Enterprise, Trade and Innovation the overall cost to employers of the planned increase in the minimum wage. [7352/11]

Richard Bruton (Dublin North Central, Fine Gael)
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The recent reduction in the national minimum wage came into effect on 1 February last. The number of workers who had been paid at or below the previous minimum wage of €8.65 per hour constituted less than 4% of the total at work, or about 60,000 people. At the time of the minimum wage cut, an employee who was working under a contract of employment that sets wages at or above the national minimum wage was entitled under their contract of employment to continue to be paid the higher rate, unless the terms of the contract were altered by agreement between both the employer and the employee concerned. Accordingly, the number of employees affected by the proposed reversal in the cut to the minimum wage and the associated cost to employers would be expected to be marginal.

While the numbers on the national minimum wage represent a relatively small proportion of the total at work, over four to five times that number are covered by our statutory wage setting mechanisms, Joint Labour Committees and Registered Employment Agreements. These mechanisms operate predominantly in sectors where wage costs are a major component of overall costs. In this context, it is important to note that many employers operating in sectors covered by these arrangements have indicated that it is not so much the national minimum wage rate that is of concern to them, but rather the archaic inflexibilities inherent in the statutory wage setting mechanisms that cause them most difficulty. It is clear that these mechanisms impose an additional set of rigidities on the labour market and prevent the labour market from adjusting quickly during times of economic change and are in need of radical reform.

In this context, the independent review of the JLC/REA system, which I expect to receive shortly, will provide, as part of its Terms of Reference, an assessment of whether and to what extent the function played by Employment Regulation Orders in ensuring protection of minimum wages and conditions overlaps with that of the statutory national minimum wage system. Following consideration of the report by the Government, an action plan will be developed in consultation with the EU/IMF with a view to early implementation of the necessary reforms.